Overview

With the revision of the PF wage limit from ₹15,000 to ₹25,000, the PF contribution may increase for employees whose applicable PF wages are between ₹15,000 and ₹25,000.

This can result in:

• Higher employee PF deduction
• Higher employer PF contribution
• Lower employee net salary
• Increase in employee CTC, if the additional employer contribution is added over and above the existing CTC

If your organization is comfortable with the increase in CTC, no salary restructuring is required.

However, if you want to keep the employee's CTC unchanged, you can adjust the increased employer PF contribution against the employee's existing salary components, such as Special Allowance/Other Allowanxc.

Below are the different scenarios and the recommended ways to handle them in HRStop.

Scenario 1: PF Wages Are ₹15,000 or Less

If an employee's applicable PF wages are ₹15,000 or less, there is no impact due to the revised PF limit.

Example

Since the PF wages are already below the previous ₹15,000 limit, the revised ₹25,000 limit does not change the calculation.

What do you need to do?

Nothing.

There is no need to restructure the employee's salary or update the CTC.

The existing salary structure can continue as it is.

Scenario 2: PF Wages Are Between ₹15,000 and ₹25,000

This is the primary scenario affected by the revised PF limit.

Suppose an employee has:

PF Wages = ₹20,000

Earlier, PF was calculated with the ₹15,000 ceiling.

Earlier calculation

With the revised limit:

Revised calculation

Therefore:

• Employee PF deduction increases by ₹600
• Employer PF contribution increases by ₹600
• Employee's net salary reduces by ₹600
• If the employer contribution is added to CTC, employee CTC increases by ₹600

How to Keep CTC Unchanged

If you do not want the employee's CTC to increase, you can reduce an existing salary component by the same amount as the increase in employer PF contribution.

For example:

Increase in Employer PF = ₹600

You can reduce:

Special Allowance / Other Allowance = ₹600

Therefore:

Additional Employer PF       +₹600
Reduction in Special Allowance -₹600
----------------------------------
Change in CTC                  ₹0

The employee's CTC therefore remains unchanged.

Example

The employee's PF deduction will still increase because of the revised PF limit, but the additional employer contribution is offset by reducing the Special Lines component.

How to Make the Change in HRStop

There are two recommended ways to restructure the salary while keeping the employee's CTC unchanged.

Option 1: Using Appraisal — Recommended

1. Go to Payroll → Appraisals and use the Import option available on the Trigger Appraisal page.
2. Download the sample CSV, update the required salary components and Special Allowance values in the CSV file. Reduce the Special Allowance by the same amount as the increase in the employer PF contribution. For example, if the employer PF increases by ₹600, reduce the Special Allowance amount by ₹600
3. Upload the file to apply the changes to multiple employees.

For Single Employee, Navigate to Payroll=> Appraisal, Click on Trigger Appraisal button, On Trigger Appraisal page, select the employee and select the option "Update only Salary of Employee'.  Adjust the special allowance value and click on button Trigger to trigger the appraisal.

Option 2: Directly Update Employee Salary

1. Go to Settings → Payroll → Employee Salary.
2. click Import on the Employee Salary page.
3. Download the sample CSV, update the required Employer Contribution and Special Allowance values.
4. Once values changed, upload the file.

For single employee, Go to Settings → Payroll → Employee Salary, Find the employee whose salary needs to be updated and click the Edit icon, Reduce the Special Allowance by the amount of the increased employer PF contribution, Save the revised salary structure. The employee's overall CTC will remain unchanged

Scenario 3: You Are Comfortable With the Increase in CTC

If your organization is comfortable with the additional employer PF contribution being added to the employee's CTC, no salary restructuring is required.

HRStop will automatically calculate PF according to the applicable PF limit.

For example:

Previous Employer PF = ₹1,800
New Employer PF      = ₹2,400
Increase             = ₹600

The additional ₹600 will be reflected as an increase in the employer's contribution and consequently in the employee's CTC.

In this case, you don't need to make any changes to the employee's salary structure.

Scenario 4: PF Is Already Being Calculated Without a Wage Limit

Some organizations may already have configured PF to be calculated on the employee's actual PF wages without applying the ₹15,000 ceiling.

For these employees, the revised ₹25,000 limit does not create an additional impact if both employee and employer PF contributions are already being calculated on actual wages.

Example

PF wages:

₹20,000

If the organization was already calculating:

Employee PF = 12% × ₹20,000 = ₹2,400
Employer PF = 12% × ₹20,000 = ₹2,400

then there is no additional change resulting from the revision of the statutory ceiling.

No salary restructuring is required.

Important exception

If the employee's PF is currently calculated without a limit on the employee side, but the employer contribution is still restricted to the previous ₹15,000 ceiling, then the employer contribution may increase after the revision.

In that case, if you want to keep the employee's CTC unchanged, you will need to adjust the salary structure as described in Scenario 2.

Quick Decision Guide

Important Note

Salary restructuring is not mandatory because of the revised PF limit.

It is only required if your organization wants to keep the employee's existing CTC unchanged despite the increase in the employer's PF contribution.

If you are comfortable with the additional employer contribution being added to the employee's CTC, no salary structure changes are required. HRStop will calculate the PF contribution according to the applicable PF configuration.